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Wall Street’s relationship with the Trump administration has abruptly deteriorated this week after nearly four years of generally favorable policies for the financial sector. The administration’s recent proposals targeting credit card interest rates and the Federal Reserve have drawn sharp criticism from banking executives who previously benefited from Trump’s deregulatory agenda.
Until recently, Wall Street had enjoyed significant advantages under Trump’s leadership. The “One Big Beautiful Bill” signed into law in July delivered another round of tax cuts while slashing the Consumer Financial Protection Bureau’s budget by nearly half. Bank regulators under Trump had also been actively pursuing deregulation that both banks and major corporations welcomed.
However, the president has now proposed a one-year, 10% cap on credit card interest rates – a substantial reduction from current average rates between 19.65% and 21.5%. This move threatens a highly profitable business segment for many financial institutions. According to Vanderbilt University researchers, such a cap could cost banks approximately $100 billion in annual revenue.
In response to the proposed interest rate cap, shares of major credit card companies including American Express, JPMorgan Chase, Citigroup, and Capital One plummeted on Monday as investors assessed the potential impact on profits.
JPMorgan Chase’s Chief Financial Officer Jeffrey Barnum signaled the industry’s readiness to fight the proposed cap with all available resources. “Our belief is that actions like this will have the exact opposite consequence to what the administration wants in terms of helping consumers,” Barnum stated. “Instead of lowering the price of credit, it will simply reduce the supply of credit, and that will be bad for everyone: consumers, the broader economy, and yes, for us, also.”
JPMorgan Chase, one of the nation’s largest credit card issuers with $239.4 billion in customer balances, has major partnerships with companies like United Airlines and Amazon, and recently acquired Apple Card’s portfolio from Goldman Sachs.
The credit card cap proposal isn’t the only source of friction. The Trump administration has also launched a Department of Justice investigation into Federal Reserve Chair Jerome Powell, raising concerns about political interference with the central bank’s independence.
BNY Mellon CEO Robin Vince warned that challenging the Fed’s independence could undermine the administration’s stated goals. “Let’s not shake the foundation of the bond market and potentially do something that could cause interest rates to actually get pushed up, because somehow there’s lack of confidence in the Fed’s independence,” Vince cautioned reporters.
JPMorgan CEO Jamie Dimon expressed similar sentiments, stating, “I don’t agree with everything the Fed has done. I do have enormous respect for Jay Powell, the man.”
The administration’s actions appear motivated by a focus on “affordability” ahead of this year’s midterm elections. Trump has indicated he wants the credit card interest rate cap implemented by January 20, though whether this would be achieved through voluntary industry compliance or executive action remains unclear.
Even corporate partners of major banks have expressed concern. Delta Air Lines CEO Ed Bastian told analysts, “I think one of the big issues and challenges with (a potential cap) is the fact that it would actually restrict the lower end consumer from having access to any credit, not just what the interest rate they’re paying, which would upend the whole credit card industry.” Delta maintains a lucrative partnership with American Express that generates billions in revenue.
Trump appears undeterred by the industry pushback. In an overnight post on his Truth Social platform, he endorsed Senator Roger Marshall’s Credit Card Competition Act, which could further reduce bank revenue from merchant fees. “Everyone should support great Republican Senator Roger Marshall’s Credit Card Competition Act, in order to stop the out of control Swipe Fee ripoff,” Trump wrote.
These developments come as major financial institutions release their quarterly results, with JPMorgan and BNY Mellon reporting Tuesday, and Citigroup, Bank of America, and Wells Fargo scheduled to follow later this week. The earnings reports provide a backdrop for what has become an unexpected confrontation between Wall Street and a presidential administration it previously viewed as an ally.
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8 Comments
This is a fascinating development in the relationship between the White House and Wall Street. While they’ve generally been aligned, this dispute over credit card rates and Fed policy shows there are clear limits to their partnership. It will be important to see how this plays out and whether Trump is willing to compromise or if he doubles down on his confrontational approach.
You make a good point. The friction between Trump and the financial industry could portend bigger battles ahead, especially if the administration continues to pursue policies that directly threaten bank profits. This bears close watching to understand how the power dynamics evolve between the two sides.
This highlights the complexity of the relationship between the White House and Wall Street. While they’ve aligned on many issues, there are clearly some red lines that the financial industry is unwilling to cross. A 10% cap on credit card rates is a significant intervention that could have major revenue impacts for banks.
Agreed, the proposed interest rate cap seems like a bridge too far for the banking industry. They’ve benefited tremendously from Trump’s deregulatory agenda, but this particular move appears to be a step too far in their eyes. It will be intriguing to see if the administration is willing to back down or if this leads to an escalating conflict.
The divergence between Trump and Wall Street is quite unexpected. After years of close cooperation, this public pushback from banking executives signals a real shift. It will be crucial to monitor whether the administration modifies its proposals or digs in, as that could have significant implications for the financial sector and the broader economy.
This clash between Trump and Wall Street is quite surprising given their traditionally close ties. The proposed credit card interest rate cap seems to have crossed a line for the banking industry, who have otherwise benefited enormously from the administration’s deregulatory agenda. It will be intriguing to see whether Trump backs down or persists with this confrontational approach.
Interesting to see Wall Street push back against Trump’s proposals targeting the Fed and credit card industry. These are typically friendly allies, so this signals a real shift in their relationship. It will be important to see how this unfolds and whether Trump backs down or doubles down on his attacks.
You’re right, this is a notable development. Wall Street has generally been in Trump’s corner, so this divergence suggests the proposed policies may go too far in their view. It will be crucial to watch how this dynamic evolves between the administration and the financial sector.